Question 1

If two foods are perfect substitutes, the cross elasticity between them is

Accepted Answer

A)  zero 
B)  negative 
C)  between zero and one 
D)  infinite 
E)  there is no specific cross elasticity for perfect substitutes 
A)  zero 
B)  negative 
C)  between zero and one 
D)  infinite 
E)  there is no specific cross elasticity for perfect substitutes

Question 2

Explain the existence of natural monopolies such as regional electric companies. What are the benefits of allowing such firms to remain monopolists?

Accepted Answer

Natural monopolies usually have high fix

Question 3

A positive cross elasticity of demand means two goods

Accepted Answer

A)  have downward-sloping demand curves 
B)  are substitutes and may belong to the same market 
C)  are complements and may belong to the same market 
D)  are normal goods 
E)  have upward-sloping demand curves 
A)  have downward-sloping demand curves 
B)  are substitutes and may belong to the same market 
C)  are complements and may belong to the same market 
D)  are normal goods 
E)  have upward-sloping demand curves

Question 4

There is only one firm in a monopoly.

Accepted Answer

A) True 
 B)False

Question 5

Legally, a patent grants a firm an exclusive right to its innovation for a period of

Accepted Answer

A)  1 year 
B)  5 years 
C)  10 years 
D)  14 years 
E)  17 years 
A)  1 year 
B)  5 years 
C)  10 years 
D)  14 years 
E)  17 years

Question 6

Suppose there is only one firm producing steel, one producing fiberglass, and one producing concrete. If steel and concrete are considered substitute goods in construction, while steel and fiberglass are considered substitute goods in auto production, there is no monopoly in the

Accepted Answer

A)  steel market 
B)  fiberglass market 
C)  concrete market 
D)  construction market 
E)  boat market 
A)  steel market 
B)  fiberglass market 
C)  concrete market 
D)  construction market 
E)  boat market

Question 7

Firms in monopolistic competition and oligopoly depend on some degree of brand loyalty. Which goods are able to command the most brand loyalty?

Accepted Answer

A)  facial tissues 
B)  cola drinks 
C)  shampoo 
D)  cigarettes 
E)  toothpaste 
A)  facial tissues 
B)  cola drinks 
C)  shampoo 
D)  cigarettes 
E)  toothpaste

Question 8

Perfectly competitive producers do not need to consider how their output levels affect price.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following characteristics does not contribute to the identification of specific market structures?

Accepted Answer

A)  number of firms 
B)  ease or difficulty of entry 
C)  complementarity of goods 
D)  control over price 
E)  substitutability of goods 
A)  number of firms 
B)  ease or difficulty of entry 
C)  complementarity of goods 
D)  control over price 
E)  substitutability of goods

Question 10

In a market where all goods are perfect substitutes for each other,

Accepted Answer

A)  the price elasticity of demand is 1.0 for all goods 
B)  the market is perfectly competitive 
C)  only one producer dominates 
D)  only a few firms can operate 
E)  brand loyalty is high 
A)  the price elasticity of demand is 1.0 for all goods 
B)  the market is perfectly competitive 
C)  only one producer dominates 
D)  only a few firms can operate 
E)  brand loyalty is high

Question 11

Oligopolies are known for the mutual interdependence of firms.

Accepted Answer

A) True 
 B)False

Question 12

A monopoly whose monopoly power is based on its exclusive access to a resource is always threatened by the possibility of

Accepted Answer

A)  technological change 
B)  patents 
C)  economies of scale in production 
D)  new firms entering the industry 
E)  its position as a natural monopoly 
A)  technological change 
B)  patents 
C)  economies of scale in production 
D)  new firms entering the industry 
E)  its position as a natural monopoly

Question 13

If a perfectly competitive firm doubles its output,

Accepted Answer

A)  price will fall, obeying the law of demand 
B)  it will have no effect on price 
C)  the market supply curve shifts to the left 
D)  its profit will double 
E)  it prevents other firms from entering the market 
A)  price will fall, obeying the law of demand 
B)  it will have no effect on price 
C)  the market supply curve shifts to the left 
D)  its profit will double 
E)  it prevents other firms from entering the market

Question 14

Think cross elasticity. Suppose that the price of cod increases from $10 to $12. If perch and cod belong to the same market and consumers had demanded 20 perch before the increase in the price of cod, they will now demand

Accepted Answer

A)  34 perch 
B)  8 perch 
C)  24 perch 
D)  no more than 28 perch 
E)  at least 32 perch 
A)  34 perch 
B)  8 perch 
C)  24 perch 
D)  no more than 28 perch 
E)  at least 32 perch

Question 15

A perfectly competitive firm need never consider

Accepted Answer

A)  price because it cannot control price 
B)  its fixed cost because it cannot shut down 
C)  its market share because advertising keeps it competitive 
D)  the effect of its own production on price 
E)  barriers to entry because the barriers never change 
A)  price because it cannot control price 
B)  its fixed cost because it cannot shut down 
C)  its market share because advertising keeps it competitive 
D)  the effect of its own production on price 
E)  barriers to entry because the barriers never change

Question 16

Andrew Carnegie, the first U.S. steel mogul, built his empire by

Accepted Answer

A)  patenting each new type of steel 
B)  owning all of the U.S. iron ore deposits 
C)  being the most efficient, that is, having the lowest ATC 
D)  buying up his competitors 
E)  enlisting the protection of the government 
A)  patenting each new type of steel 
B)  owning all of the U.S. iron ore deposits 
C)  being the most efficient, that is, having the lowest ATC 
D)  buying up his competitors 
E)  enlisting the protection of the government

Question 17

Your textbook provides several examples of goods that belong to the same market. For two goods to be in the same market, they must

Accepted Answer

A)  be produced by a monopoly 
B)  be substitutes 
C)  be complements 
D)  have a cross elasticity that is less than -3 
E)  have relatively high prices 
A)  be produced by a monopoly 
B)  be substitutes 
C)  be complements 
D)  have a cross elasticity that is less than -3 
E)  have relatively high prices

Question 18

A historical note: The founder of the U.S. Steel Corporation was

Accepted Answer

A)  J. P. Morgan 
B)  John Rockefeller 
C)  Thomas Edison 
D)  Andrew Carnegie 
E)  Herbert Spencer 
A)  J. P. Morgan 
B)  John Rockefeller 
C)  Thomas Edison 
D)  Andrew Carnegie 
E)  Herbert Spencer

Question 19

Which of the following is a distinguishing characteristic of the oligopoly market structure?

Accepted Answer

A)  easy entry 
B)  difficult entry 
C)  many, many firms 
D)  many, many close substitutes 
E)  firms's horizontal demand curves 
A)  easy entry 
B)  difficult entry 
C)  many, many firms 
D)  many, many close substitutes 
E)  firms's horizontal demand curves

Question 20

Arranging the four market structures according to the number of firms in the industry ,from fewest to the most, would be

Accepted Answer

A)  monopoly, monopolistic competition, oligopoly, perfect competition 
B)  monopoly, perfect competition, oligopoly, monopolistic competition 
C)  monopoly, oligopoly, monopolistic competition, perfect competition 
D)  oligopoly, monopoly, monopolistic competition, perfect competition 
E)  perfect competition, monopolistic competition, oligopoly, monopoly 
A)  monopoly, monopolistic competition, oligopoly, perfect competition 
B)  monopoly, perfect competition, oligopoly, monopolistic competition 
C)  monopoly, oligopoly, monopolistic competition, perfect competition 
D)  oligopoly, monopoly, monopolistic competition, perfect competition 
E)  perfect competition, monopolistic competition, oligopoly, monopoly

Exam 10: Identifying Markets and Market Structures

If two foods are perfect substitutes, the cross elasticity between them is

Explain the existence of natural monopolies such as regional electric companies. What are the benefits of allowing such firms to remain monopolists?

A positive cross elasticity of demand means two goods

There is only one firm in a monopoly.

Legally, a patent grants a firm an exclusive right to its innovation for a period of

Suppose there is only one firm producing steel, one producing fiberglass, and one producing concrete. If steel and concrete are considered substitute goods in construction, while steel and fiberglass are considered substitute goods in auto production, there is no monopoly in the

Firms in monopolistic competition and oligopoly depend on some degree of brand loyalty. Which goods are able to command the most brand loyalty?

Perfectly competitive producers do not need to consider how their output levels affect price.

Which of the following characteristics does not contribute to the identification of specific market structures?

In a market where all goods are perfect substitutes for each other,

Oligopolies are known for the mutual interdependence of firms.

A monopoly whose monopoly power is based on its exclusive access to a resource is always threatened by the possibility of

If a perfectly competitive firm doubles its output,

Think cross elasticity. Suppose that the price of cod increases from $10 to $12. If perch and cod belong to the same market and consumers had demanded 20 perch before the increase in the price of cod, they will now demand

A perfectly competitive firm need never consider

Andrew Carnegie, the first U.S. steel mogul, built his empire by

Your textbook provides several examples of goods that belong to the same market. For two goods to be in the same market, they must

A historical note: The founder of the U.S. Steel Corporation was

Which of the following is a distinguishing characteristic of the oligopoly market structure?

Arranging the four market structures according to the number of firms in the industry ,from fewest to the most, would be

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

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